Natural gas prices continued to correct from recent highs last week. US Henry Hub futures have fallen to $3.558 per million British thermal units (mmBtu). This is down more than 15% from their highest levels since January last year, which were recorded in December at $4.201.
But this contrasts with UK and European natural gas futures (TTF), which remain near their highest levels since November 2023.
The recent rally was driven by cold weather forecasts and the expiration of Russian gas supplies to Europe via Ukraine.
How new regime in Syrian could affect the natural gas market
Political developments in the Middle East, including the fall of the Bashar al-Assad regime in Syria and the emergence of a new administration with close ties to Qatar and Turkey, are also likely to impact natural gas market dynamics, particularly in Europe.
The Assad regime had rejected a project to pump Qatari gas through pipelines to Europe via Syria. After its fall, this pipeline may actually see the light.
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The project would diversify Qatari export routes. It could secure long-term contracts with Europe, even with the capabilities of the liquefied natural gas (LNG) exports, and strengthen Turkey’s position as a vital player in the energy market, according to Anadolu Agency in Turkey.
The new route would make the European natural gas market more competitive, which could increase downward pressure on prices – still very low compared to the historical peaks of 2022.
“The European market is suffering from an oversupply due to mild winter seasons and weak economic activity, in addition to the increasing competition brought about by the development of natural gas liquefaction and transportation technology,” observed Samer Hasn, a commodities analyst with CFD broker XS.com in Dubai.
On the other hand, the cross-border project may continue to face many obstacles.
European rates and red tape
On the European side, the lack of a near horizon for restoring economic strength, along with the increasing shift towards renewable energy sources – which in turn could be driven by the continued low interest rates in the Eurozone – would keep demand prospects weak amidst the prevailing competition.
Regulatory hurdles could also hamper gas supplies to Europe. Qatar is reluctancet to pay any fines that could be imposed as a result of the European Commission’s due diligence law. This might stop gas shipments, Qatari Energy Minister Saad al-Kaabi told the Financial Times in December.
The EU has threatened Qatar with new legislation designed to crack down on forced labour and environmental damage. Qatar is the world’s third biggest exporter of LNG. Since Russia’s invasion of Ukraine, it accounts for almost 14% of Europe’s imports.
Syrian peace will help Qatar to compete
From the Syrian side, this strategic project requires a solid peace in the country. Russia and Iran may not want that.
In the context of the Qatari gas pipeline, these three countries are regarded as fierce competitors in the gas market. This project will further reduce any possibility of gas supplies to Europe from Russia and Iran in the future, even if the current deep conflicts are resolved.
Traders will be following political developments in Syria, which could play a pivotal role in the energy market going forward.
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